SUNDAYS RIVER VALLEY MUNICIPALITY

2011/12QUARTERLY FINANCIAL ASSESSMENT REPORT

FOR THE QUARTER ENDING 30 JUNE 2012

(Sec 52(d) report)

SUMMARY OF OVERALL FINANCIAL POSITION

1. BUDGET PERFORMANCE – SUMMARY

1.1 OPERATING BUDGET PERFORMANCE

Table 1: Operating Budget performance for quarter ending 30 JUNE 2012

APPROVED ADJUST BUDGET
R’000 / ACTUAL FOR THE PERIOD
R’000 / VARIANCE
ACTUAL TO BUDGET
R’000 / % OF TOTAL BUDGET
R’000
EXPENDITURE / 102448 429 / 68720 301 / 33728 127 / 67%
REVENUE / 133076 725 / 115324 966 / (17751759) / 86.66%
SURPLUS (DEFICIT) / 30628 296 / 46604 665 / 15976 368 / 152.16%

Explanation and reason for variances:

Expenditure for the period ending 30 June 2012 amounted to R68.720 million and was R33.728 million less than anticipated for this period. The main reason for the under expenditure is the non-recording of annual charges. This expenditure is normally recorded at year-end and includes the following:

Depreciation – R15000 000

Bad debt provision – R14000000

Other provisions – R431 906

This will bring total expenditure for the period up to R98.152 million or 95.8% of the budget.

Income for the period ending 30 June 2012 was recorded at R115.324 million or 86.66% of the budget.

Conditional grant income relating to Paterson Bulk Water for the 4th quarter still needs to be recorded as well as Income from Grants (VAT) – R2 million.

1.2 CAPITAL BUDGET PERFORMANCE

Table 2: Capital Budget performance for the period ending 30 June 2012:

APPROVED BUDGET
R’000 / ACTUAL FOR THE PERIOD
R’000 / VARIANCE
ACTUAL TO BUDGET
R’000 / % OF TOTAL BUDGET
EXPENDITURE / 39492 / 25 234 / 14 258 / 64%

Explanation and reason for variance:

Capital expenditure for the period ending 30 June 2012 was recorded at

R25.2 millionand was R14.2 millionless than anticipated.The information with regards to the total expenditure for 4th quarter on Paterson Bulk project, managed by Amatola Waters, is still outstanding. Up to 31 March 2012 it was recorded that only 38% of the R16 million grant funds availed to Amatola was spent on this project. Further the capitalisation of the copier machines still needs to be recorded as the final agreement was only recently received. Council will recall that in March 2012 it was resolved that the Council approves the action of management not to acquire the vehicles that were originally budgeted for. It is now required that Council approves the shift of funds from vehicles to the acquisition of the copier machines which acquisition was approved by the Administrator at the time.

1.3 CASH FLOW POSITION AS AT 30 JUNE 2012

Table 3: Summary of Cash flow position (Primary Bank Account) as at

30 June 2012

CASH BALANCE B/F FROM 1 July 2011 / (162738)
CASH RECEIVED FOR THE YEAR TO DATE / 130715 798
CASH PAYMENTS MADE FOR THE YEAR TO DATE / (129202038)
CASH BALANCE AS AT 30 JUNE 2012 / 1351 022

1.4 BANK BALANCE, INVESTMENTS, AND BORROWINGS IN TERMS OF S.71(b)

Table 4: Key Treasury Information as at 30 June 2012

OPENING BALANCE
01/07/2011 / MOVEMENT DURING THE PERIOD / CLOSING BALANCE
30 June 2012
CURRENT ACCOUNT / (162 738) / 1513760 / 1351 022
INVESTMENTS / 528949 / 1132 704 / 1 661 652.92
TOTAL EXTERNAL BORROWING / 9870611 / (286108) / 9584 503
DBSA / 1965731 / (462292) / 1503439
DWA / 7904880 / (1200000) / 6704 880

1.5 PERFORMANCE ON REVENUE COLLECTION

Table 5: Billed Income for services – amounts billed to date and cash received.

QUARTER / AMOUNTS BILLED – YEAR TO DATE
R’000 / CASH RECEIVED – YEAR TO DATE
R’000 / SUBSIDIES ALLOCATED – YEAR TO DATE
R’000 / COLLECTION RATE YEAR TO DATE
%
4THQUARTER / 40160 187 / 16379 382 / 3755 432 / 50.14

Please note that no interest could be charged until the backlog accounts were sent out.

2. OPERATING BUDGET PERFORMANCE

2.1 OPERATING EXPENDITURE BY VOTEINTERMS OF S.71(c)

Table 6: Operating Expenditure for the year ending 30 June 2012 by Vote.

Explanation for major variances:

General:

As mentioned elsewhere in the report, the main reason for the under expenditure is the non-recording of annual charges which is currently in the process of being captured. This includes:

Depreciation – R15000 000

Bad debt provision – R14000000

Other provisions – R431906

The expenditure on repairs and maintenance also indicated an extreme under expenditure where budget of R4838462 is compared to actual of R1981031

2.2 OPERATING EXPENDITURE BY TYPE

Table 7: Operating expenditure by type

DESCRIPTION / APPROVED ADJUST BUDGET / ACTUAL FOR THE PERIOD / (OVER) UNDER
EXPENDITURE / %
ACTUAL TO APPROVED BUDGET
SALARIES, WAGES & ALLOWANCES / 23788 149 / 22757 945 / 1030 204 / 95.67%
SALARIES & WAGES: SOCIAL CONTRIBUTIONS / 4 257872 / 4186 857 / 71 015 / 98.33%
COUNCIL REMUNERATION / 3 826 025 / 3785 557 / 40 468 / 98.94%
GENERAL EXPENSES / 21597 887 / 19470 359 / 2127 528 / 90.15%
GRANTS AND SUBSIDIES PAID / 2 892800 / 5055 938 / (2163138) / 174.78%
DEPRECIATION / 15000 000 / 0 / 15000 000 / 0%
BULK PURCHASES / 10 781135 / 10592 109 / 189 026 / 98.25%
REPAIRS & MAINTENANCE / 4838 462 / 1981 031 / 2857431 / 40.94%
CONTRACTED SERVICES / 351 673 / 469 158 / (117485) / 133.41%
INTEREST EXPENSE / 682520 / 421 349 / 261 171 / 61.73%
CONTRIBUTION TO/FROM PROVISIONS / 14 431 906 / 0 / 14431 906 / 0%
TOTAL / 102448429 / 68720301 / 33728 127 / 67%

Explanation:

General expenditure:

The following expenditure still needs to be recorded –

Depreciation:R15 million

Prov Bad debt:R14 million

Contribution to provisions:R432 thousand

Interest expenseR300 thousand approximately

This will increase total expenditure for year to R98452 301 or 96.10% of the budget.

Repairs and maintenance

The planned repairs and maintenance has not been expended as anticipated. Resealing of roads had to go out on tender and the contractors are on site, but the expenditure could not be reflected in the 2011/12 budget.

Fruitless and Wasteful expenditure

The following expenditure is regarded as fruitless and wasteful expenditure:

  • Interest on creditors account – R282 854
  • Salary paid to Mrs Roji during suspension time.

2.3 OPERATING REVENUE BY REVENUE SOURCEIN TERMS OF S.71(a)

Table 8: Operating Revenue for the period ending30 June 2012by Source.

REVENUE BY SOURCE (BILLED) / APPROVED BUDGET / ACTUAL FOR THE PERIOD / (UNDER)/
OVER / % ACTUAL TO TOTAL BUDGET
PROPERTY RATES / 14 699 717 / 13301 764 / (1397953) / 90.49%
PENALTIES / 19 244 / 8 676 / (10568) / 45.08%
SERVICE CHARGES / 33 434020 / 33677 729 / 243 709 / 100.73%
RENT OF FACILITIES / 62 731 / 142 391 / 79 660 / 226.99%
INTEREST EXTERNAL INVESTMENTS / 199 892 / 164 845 / (35047) / 82.47%
INTEREST ON OUTSTANDING DEBTORS / 1 859 991 / 2 919 / (1857072) / 0.15%
FINES – TRAFFIC / 1 000 000 / 834 413 / (165587) / 83.44%
OTHER – FINES / 10 780 / 21 261 / 10 481 / 197.23%
LICENSES & PERMITS / 4 614947 / 1856 431 / (2758516) / 40.22%
INCOME FROM AGENCY SERVICES / 1 106 679 / 1273 723 / 167 044 / 115.09%
GRANTS & SUBSIDIES – OPERATING / 36 658 151 / 36318 753 / (339398) / 99.07%
GRANTS & SUBSIDIES – CAPITAL / 34529000 / 24589 050 / (9939950) / 71.21%
OTHER REVENUE / 4 881 573 / 3133 011 / (1748562) / 64.18%
TOTAL REVENUE / 133076725 / 115324 966 / (17751759) / 86.66%

Explanations:

Licenses and permits

The adjusted target for licenses and permits were based on mid-year figures. It however transpired that some income, which does not relate to licenses and permits, were recorded in the income statement during the first 6 months resulting in a unrealistic projections. The error was corrected, but the adjustment budget was however approved based on the incorrect projections.

Grants and subsidies (capital)

The entire MIG funds were spent and recognised as revenue. The information on Paterson Bulk Water project for the 4th quarter is still outstanding. The grant from CDM for fire fighting services has not been received.

Interest on outstanding debtors

Interest on outstanding debtors could not be raised due to problems with the billing system and accounts sent out late.

Other revenue

Income from grants (VAT) still needs to be recorded – R2 million

2.4 OVERALL PERFORMANCE ON THE OPERATING BUDGET

Table 9: Operating Budget Performance for the period ending 30 June 2012

APROVED
BUDGET / YTD
EXPENDITURE BUDGET / 102448429 / 102448 429
ACTUAL TO DATE / 68720301 / 68720301
VARIANCE – UNDER/(OVER SPENDING) / 33728128 / 33728 128
% OF BUDGET SPENT / 67% / 67%
REVENUE BUDGET / 133076 725 / 133076 725
ACTUAL BILLED TO DATE / 115324966 / 115324966
VARIANCE – OVER/(UNDER) BILLED / (17751759) / (17751759)
% OF BUDGET BILLED / 86.66% / 86.66%
SURPLUS/(DEFICIT) BUDGET POSITION / 30628 296 / 30628 296
SURPLUS/(DEFICIT) POSITION TO DATE / 46604665 / 46604665

3. CAPITAL BUDGET PERFORMANCE- MFMA – S.71 (d) (e) & (f)

3.1 CAPITAL EXPENDITURE BY VOTEIN TERMS OF S.71(d)

Table 10: Capital Expenditure for the period ending 30 June 2012by Vote.

DEPARTMENT/
VOTE / APROVED BUDGET / ACTUAL FOR THE PERIOD / (OVER)/
UNDER
EXPENDITURE / % ACTUAL TO APPROVED BUDGET
Executive & Council / 78 000 / 171 412 / (93412) / 219.75%
Finance & Admin / 699 650 / 168 433 / 531 217 / 24%
Community Services / 31 300 / 15 214 / 16 086 / 48.6%
Planning & Dev / 1150000 / 47 775 / 1102225 / 4.15%
Public Safety / 96 100 / 89 176 / 6 924 / 92.80%
Environmental Services / 8 500 / 0 / 8500 / 0%
Roads Transport / 1129 679 / 981 993 / 147 686 / 86.93%
Electricity / 0 / 17 231 / (17231)
Waste Water / 9 610 829 / 10304 905 / (694076) / 107.22%
Solid waste / 730000 / 0 / 730000 / 0%
Water Services / 25958 292 / 13437 561 / 12520 731 / 51.76%
TOTAL CAPITAL EXPENDITURE / 39492 350 / 25233 700 / 14258650 / 63.90%

Explanation:

MIG grant was spent 100% as at 30 June 2012. Information with regards to the total expenditure on the Paterson Bulk water project is still awaiting. On 31 March 2012 Council approved the action of management not to buy vehicles due to reasons stipulated. The copier machines that was approved for acquisition by the Administrator prior to her departure still needs to be approved by Council and needs to be capitalised.

3.2 FUNDING OF THE CAPITAL BUDGET

Table 11: Funding of Capital Expenditure for the period ending 30 June 2012

FUNDING SOURCE / APROVEDADJ BUDGET / FINANCING OF CAPITAL EXPENDITURE INCURRED TO DATE
NATIONAL GOVERNMENT GRANTS
MUNICIPAL INFRASTRUCTURE / 18528 800 / 18477 810
RBIG / 16000 000 / 6080 000
TOTAL NATIONAL GOVERNMENT GRANTS / 34528 800 / 24527 810
DISTRICT MUNICIPALITY
Environmental health subsidy / 8500 / 0
TOTAL DISTRICT FUNDS / 8 500 / 0
COUNCIL OWN FUNDS
OWN FUNDS / 625 050 / 705 891
TOTAL OWN FUNDS / 625 050 / 705 891
LOAN FUNDING
LOANS / 4330 000 / 0
TOTAL LOANS / 4330 000 / 0
TOTAL FUNDING / 39492350 / 25233 700

Explanations:

See point 3.1

4.1 CASH FLOW POSITION

The cash flow position for the year ending 30 June 2012 is attached as Annexure A

5. PERFORMANCE ON MAIN TARIFF REVENUE COLLECTION

5.1 COLLECTION RATE

Table 12: Collection Rates as at 30 June 2012

MAIN TARIFF / AMOUNT BILLED FOR THE YEAR TO DATE / AMOUNT RECEIVED FOR THE YEAR TO DATE / SUBSIDIES ALLOCATED FOR YEAR TO DATE / (UNDER)/
OVER
COLLECTED / COLLECTION RATE % (RECEIVED/
BILLED)
PROPERTY RATES / 11903 501 / 9683 159 / 472 555 / (1747787) / 85.32%
ELECTRICITY / 11587 188 / 4337 879 / 95 111 / (7154198) / 38.25%
WATER / 13113 574 / 1456 990 / 1889 397 / (9767187) / 25.5%
REFUSE / 4621 790 / 671 831 / 910476 / (3039483) / 34.24%
SEWERAGE / 2689 566 / 229 524 / 387893 / (2252149) / 23%
TOTAL REVENUE / 43615 619 / 16379 383 / 3755 432 / 23480 804 / 50%

5.1.1 The above table shows the amount billed and the amount of cash received for each of the main tariffs.

6. OUTSTANDING DEBTORS (AMOUNTS OWED TO MUNICIPALITY)

6.1 AGE ANALYSIS – ALL TRADE DEBTORS

Table13: Age analysis per month for period ending 30 June 2012

QUARTER / TOTAL DEBT / 30 DAYS / 60 DAYS / 90 DAYS / 120 + DAYS
YTD / 84180 079 / 1129 559 / (127355) / 1967 747 / 81210 128

Explanations:

Debtors continued with an upward trend for the period ending 30 June 2012. The collection rate averaged at 50% during this period (Jun 2011: 50%) The registration of indigents has a huge impact on collection rate. Despite community meetings held, residents are still not registering for indigent support. Credit control policy is being implemented and residents have been made aware of the credit control policy. It is anticipated that the new year registration will start in July 2012 and should continue till 30 September 2012. A mass campaign should be launched to advertise the indigent registration as well as the rebates available in accordance with the Property Rates Act.

6.2 AGE ANALYSIS BY SERVICE TYPE AS AT 30 JUNE 2012

Table 14: Age analysis per service type

SERVICE TYPE / TOTAL DEBT / 30 DAYS / 60 DAYS / 90 DAYS / 120 + DAYS
WATER / 33458 912 / 3397 7002 / 272 042 / 447 317 / 29341 851
ELECTRICITY / 14064 496 / 3078 947 / (651366) / 656 394 / 10979 981
RATES / 20512768 / 857 239 / (351973) / 228 869 / 19778 663
SEWERAGE / 8085 677 / 244 957 / (2488) / 180 444 / 7662 764
REFUSE / 14254 348 / 644 560 / (11744) / 431 674 / 13189 858
HOUSING / 107 649 / 31 471 / (3247) / 13 261 / 66 164
OTHER / (6303771) / (7125317) / 621 421 / 9 248 / 190 877
TOTAL / 84180 079 / 1129 559 / (127355) / 1967 747 / 81210 128

The non-registration of indigents has a huge impact on debt collection and is an area that needs to receive priority attention. Various meetings in different communities were held to discuss and assist community members with indigent registration, but the response was not satisfactorily. Currently only 2900 people are registered for indigent support. The municipality will embark on a mass campaign for data cleansing and indigent registration during the next 4 months. The write off of indigent debt should be considered.

7. CREDITORS

7.1 CREDITORS AGE ANALYSIS

Table 17 – Creditors age analysis as at 30 June 2012

TOTAL / CURRENT / 30 - 60 DAYS / 60- 90 DAYS / 90 – 120 DAYS / 120 DAYS+
Trade creditors / 5921 865 / 1838747 / 1043173 / 357106 / 294 435 / 2388 404
Auditor General / 2418333 / 68 835 / 2349 498
TOTAL / 8340 198 / 1838 747 / 1043 173 / 357 106 / 363 270 / 4737 902

New creditors are paid within an average of 90 days. This is an improvement from 180 days in the previous financial year. A payment arrangement has been entered into with the Auditor General to pay the outstanding balance within 6 months. Other creditors which are long outstanding are Alcari for traffic vehicles which are currently a matter between attorneys and ECar Hire for fleet of technical services.

Interest charged on overdue accounts is currently R282 856. The main interest attracting accounts is Eskom, Alcari and Auditor General.

ANNEXURES:

Annexure A – cash flow projection

1